MISTAKE OF FACT

Question 1

Mistake

Answer 1

when a party makes a faulty assumption about the present circumstances and enter into a contract on that basis

Question 2

Windfall Cases

Answer 2

i. e. Car was bought after repossession and discovered to have $80k in the gas tank, or painting was purchased and an original copy of the Declaration of Independence was found behind it
(a) Court will uphold the windfall if the party that had it earlier had a chance to discover the windfall himself—the party that discovered the new property brought the wealth back into society, so we reward him for it
(ii) On the other hand: if someone accidentally sells a baseball card listed as “5000” for $50 rather than its actual price of $5000, courts won’t uphold the windfall because it’s redistributive

Question 3

Unilateral Mistake

Answer 3

Mistaken party isn’t excused unless:

(i) The other party (non-mistaken) knew or had reason to know of the party’s mistake; or
(ii) The mistake was based on a clerical error (not available in all jurisdictions and is subject to exceptions regarding error made from extreme negligence or where the other party relied on the clerical error)

Question 4

Mutual Mistake

Answer 4

Both parties have operated under the same incorrect assumption about the current set of facts. Contract is voidable by the disadvantaged party where:

(i) The fact about which the parties were mistaken is essential to the contract;
(ii) Both parties were mistaken; and
(iii) The disadvantaged party did not bear the risk of mistake under the parties’ agreement

Question 5

Monarch

Monarch Marking System Co. v. Reed’s Photo Mart, Inc.

Answer 5

Reed orders 4 million vs. 4 thousand labels. Judgement for Monarch.
Four Part Test:
(i) Mistake must be important (i.e. enforcing would be unconscionable)
(ii) Mistake must relate to material feature or element
(iii) Mistake must have been made, regardless of the exercise of ordinary care
(iv) Parties can be returned to the status quo